A Convertible Bond

question 428

Multiple Choice

A convertible bond:

• A) Is a combination of a loan and a put option.
• B) Normally has a perpetual conversion feature.
• C) Has a value which is equal to its straight bond value plus it conversion value.
• D) Has a minimum value which is equal to the greater of the two floor values.
• E) Is worth an amount equal to the greater of the straight bond value or the conversion value plus the option to abandon value.

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Definitions:

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